Big First Plunge Back into Coastal Resort Housing

Ambitious plans for a 645-lot housing development spring from a $62 million private equity fund that snaps up distressed coastal real estate. A team of Mobile/New York investment partners steers the fund.

Kathy Jumper

Nathan Cox at the still timbered site of the planned Lakes at Bon Secour.

Photos by Matthew Coughlin

Cash is king.

Just ask four Mobile natives who raised $62 million in private equity in less than six months. And they are now launching the first mega residential project in years on Alabama’s Gulf Coast — the 645-lot Lakes at Bon Secour off the Intracoastal Waterway in Gulf Shores.

In a resort real estate market that has not seen a major development break ground in more than six years, the Gulf Coast Opportunities Fund partners have got what it takes — good old-fashioned cash.

The GCOF was formed by Bienville Capital Management, a private equity firm whose principals are Ralph Reynolds of Darien, Conn., who commutes to his New York office; Cullen Thompson and Billy Stimpson, both based in New York; and member, Nathan Cox, owner of Bellator Real Estate & Development in Spanish Fort. All four attended UMS Preparatory School in Mobile, and all own homes in Baldwin County.

The GCOF has about 100 investors from all over the world and, so far, $52 million of the fund has been invested in distressed properties in Baldwin County and coastal Florida, including subdivisions, beachfront property and raw land, according to Cox.

“We see so many positives in the south part of Baldwin County that we have made substantial investments, especially in Gulf Shores and Orange Beach,’’ says Cox, 30. “We’re getting to buy it at a better price point.’’

The Lakes at Bon Secour site was attractive to the developers for its size, quality location and price, Cox says. The $3.295 million cash purchase for the 254 acres is almost a 75 percent discount from what was owed to the bank by the original owners. In April, the Fund plans to complete the purchase of the Bon Secour Marina and conference center to add to the project’s value.

“We pay cash and we have time on our side,’’ says Thompson, 35. “In some cases, you’re buying assets at the mid-1990s price level. This is an area where the population is up by 4 percent, compared to the national average of 0.7 percent. It’s growing five times the national average.’’

Bringing 645 homes on the market, albeit in phases, is considered ambitious or downright risky in a real estate market that is finally on the rebound from hurricanes, an economic downturn and the BP oil spill of April 2010.

Still, Thompson says, “What folks considered risky six months to a year ago doesn’t look so risky now. The prices we paid were fantastic. At heart, we’re all value investors and we were able to buy cheap.’’

Gulf Coast Opportunity Fund partners believe now is the time when Baldwin County’s waterfront will again draw home buyers.

Risk is the function of what you pay, according to Thompson.

‘’That’s the same philosophy and discipline for all asset purchases across the world. It just turns out that this was a really good opportunity to invest in the place where we’re from.’’

The goal of the fund is to double or triple the $62 million over the next three to six years. And they plan to give investors an 8 percent return on their investment per year, according to the partners.

Admittedly, “it’s an ambitious return target for this fund,’’ Thompson says. But the partners are confident in the numbers. “The (economic and real estate) environment is much more positive today. We don’t mind being perceived as risk takers.’’

The Fund partners met numerous times with city officials and Gulf Shores Mayor Robert Craft before buying the property.

The city’s No. 1 focus is to develop an entertainment district along the Intracoastal Waterway, according to Craft. The city has a $1 million grant from BP to improve lighting, roadways and pedestrian walkways on both sides of the waterway. On the north side, the district would extend from Lucy Buffett’s popular Lulu’s at Homeport Marina restaurant all the way to Bon Secour Village. And on the south side, the venue would include Tacky Jack’s restaurant and the city’s public boat launch and park.

“You can see how good the market is doing, with 5 million visitors a year,’’ Cox says. “We’ve seen the success Lulu’s is having, and we have the ability to duplicate that.

“Absolutely, there is a housing demand at the Gulf. We feel like Gulf Shores will be one of the hottest markets in the coming year. I think Baldwin County has the hottest market I’ve seen since the real estate market of 2007, and I don’t see it slowing down.’’

There were more than 1,000 housing starts last year in Baldwin County, compared to less than 750 in 2011, Cox said. His company, Truland Homes, broke ground on 100 homes last year.

The market may soon sizzle, but for now banks “have zero interest’’ in financing developments such as Lakes at Bon Secour, Cox says. “Our fund is filling a liquidity void.’’

The developers are spending about $8 million from the $62 million fund on horizontal development, which means they will build the roads, amenities and infrastructure in some of the recently-purchased residential communities, such as Lakes at Bon Secour, and let local builders construct the homes.

“This will make the property more marketable, add value and make it a much better asset,’’ Cox says.

According to site plans, The Lakes at Bon Secour will feature three large lakes, and a first-class amenities package will be built on seven acres on the waterway, including a clubhouse, pool and tennis courts, Cox says. Home prices will start in the low $200s. The first phase will have 139 homes.

Kathy Jumper is a freelance contributor to Business Alabama. A reporter who has covered real estate in Mobile and Baldwin counties for many years, Jumper now writes a weekly column on real estate news for Mobile Bay Times.